The government of Nigeria has ordered the National Council on Privatisation (NCP) to suspend the planned liquidation of Nigeria Telecommunications (Nitel) and its mobile arm M-Tel, pending an investigation to determine the value of the two companies.
Valuations have varied immensely in the five unsuccessful privatisation attempts during the past decade, literally from tens of thousands to billions of dollars. It is well possible that a strategic buyer for Nitel and M-Tel as going concerns will still emerge in the last minute when the current valuation exercise has been completed. After all, Nigeria is one of the most attractive growth markets in the world – not just in telecoms itself, but also in practically every other industry, enabled by the continuously improving connectivity. However, major investment would be required in both companies – their infrastructure is poor, and there is strong competition in every market sector.
Although major improvements have been achieved over the past decade, the main challenges facing the Nigerian telecoms market remain corruption and the poor infrastructure. Telecoms infrastructure itself has greatly improved, with several international submarine fibre optic cables now competing with each other, several competing national fibre backbone networks, 3G and 4G (LTE) mobile broadband services, but it is the basic underlying infrastructure that is still lacking, such as the power grid. Millions of dollars are spent every month on diesel fuel alone to power the thousands of generators that are keeping the telecom networks across the country alive.
In terms of internet connectivity, Nigeria is in a better position than most African countries, with three competing international cables. Two additional ones, WACS and ACE are now set to bring additional competition and additional international bandwidth, which will drive prices down further, but this will also make the business tougher for the providers of that bandwidth, such as Nitel.
For more information, see: BuddeComm Nigeria research.
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